Delays and Learning the Wrong Strategies From Experience

With so many possible choices, why do managers adopt the strategies they do? We identify delays between adopting a strategy and observing the full implications of that choice as a critical factor influencing strategic choices. Using a realistic simulation of a service firm, we conduct a behavioral experiment to investigate how delays interact with outcome uncertainty to shape learning, strategy adaptation, and performance outcomes. When multiple viable strategies exist, longer delays lead decision makers towards alternatives that have rapid returns even if they are far from the global optimum. The results show that delays strengthen convergence to suboptimal regions of the strategy space, which undermines long run performance and reduces heterogeneity among firms. Surprisingly, we find no impact of uncertainty on heterogeneity in strategies and outcomes, and only a modest negative impact on learning when delays are short. In the presence of longer delays, uncertainty may even have a positive impact on learning